GE recalls hundreds of baby "warmers" in China over safety fears

(Reuters) — A healthcare unit of General Electric Co. has recalled hundreds of incubator-like infant “warmers” in China over safety concerns as Beijing tightens oversight of the country's fast-growing medical device sector.

GE Healthcare recalled 223 of the U.S.-produced warmers after uncovering a potential safety issue that could restrict oxygen supply to the child, the China Food and Drug Administration (CFDA) said in a statement on Tuesday.

The cot-like warmers are used in hospitals to regulate the body temperature of tiny infants unable to keep themselves warm because of a lack of body fat. The devices also regulate airflow and monitor vital signs.

The recall announcement coincides with tough messages from China's Cabinet this week that the government would increase oversight and fines in the medical device sector to address safety concerns.

The crackdown could intensify the challenge for international medical device makers such as United Kingdom-based GE Healthcare, as well as rivals Siemens AG and Medtronic Inc., as they look to tap into the sector. The Chinese market is estimated to double to more than $50 billion by 2020, according to research firm Global Data.

Chinese firms who fail to meet the tougher regulations could also be forced out of business, consolidating the industry and strengthening larger local players, analysts said.

GE Healthcare has issued a warning note to clients about the problem and will replace the affected units free-of-charge, said the CFDA, which is overseen by the country's Cabinet.

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Neither party gave a total value of the recalled goods, but infant warmers can cost anywhere from a few thousands dollars to more than $20,000 per unit.

The CFDA said the oxygen and air fittings on the back panel of the warmers had been reversed in some cases during assembly, which could prevent the efficient regulation of air and oxygen flow to the infant.

This could lead too little or too much oxygen being delivered to the child, a potentially fatal issue.

GE Healthcare's China unit said in an emailed statement that it had moved “swiftly to resolve the issue” and acted in accordance with Chinese laws and regulations.

“While site inspections are still ongoing, to-date no reversion has been found in inspected units in China, and no patient injuries have been reported,” GE Healthcare said.

GE has been forced to recall similar products in other markets including the United States, where it recalled warmers and resuscitation units late last year because of issues with the supply of oxygen to the baby, according to the U.S. Food and Drug Administration.

GE reported the voluntary recall to Chinese regulators earlier this month after identifying the potential safety issue, and it has already taken measures to resolve it, the CFDA said. It had earlier flagged the potential issue to clients.

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The recalled warmers include “Panda” and “Giraffe” branded warmers, which were manufactured in the United States and imported to China, GE Healthcare said.

Medical device makers in China have drawn the glare of regulators before, hit by allegations of corruption and bribery. Some firms were also targeted last year for overpricing.

China's medical products market currently stands at around $20 billion and is expected to grow at up to 20% annually over the next few years, according to McKinsey & Co.

This has attracted firms including Siemens, GE, Koninklijke Philips NV, Johnson & Johnson and Medtronic, which compete with local companies such as Mindray Medical International Ltd. and China Resources Wandong Medical Equipment Co Ltd.

An increasing focus on product quality and safety has raised the regulatory scrutiny firms operate under in the market, which analysts and lawyers say would spur an industry shake-out.

“At the end, poor and incapable companies will be eliminated, while large local players can focus their strength on R&D and innovation, perhaps taking over market share from foreign players,” said Jason Loh, a Shanghai-based medical expert at research firm SmithStreet Solutions.